Nokia Shares Tumble: ‘Facing a Grim Spring’

By

Matt Phillips

Apr 22, 2010 3:33 pm ET

Nokia shareholders are feeling the pain Thursday, as the stock nosedives 13% after the company offered up weak guidances as part of its quarterly earnings report. The company also confirmed that it was delaying the launch of its Symbian^3 gadget. The analysts have been active with downgrades. Here’s some of what they had to say:

Canaccord Adams: “With gross margins compressing, we would expect that even with a rebound in revenue, earnings growth will be limited. We are moving to a SELL recommendation.”

Oppenheimer: “The next two quarters are critical as investors will be evaluating Nokia’s chances of remaining relevant in the smartphone market. So far, it hasn’t shown an ability to deliver a compelling platform, only an ability to lower price.”

Morgan Stanley: “Although Nokia managed to sell 21.5m smartphones, ahead of our
18.1m estimate, this was driven by the low-end group, as Smartphones [average selling prices] fell 16% quarter-on-quarter to only €155 vs €186 in 4Q. This highlights the clear deficiencies at the
high-end vs Apple and RIM and others.”

Credit Suisse: “Why the weakness – two main problems in our view. 1) We believe that Nokia is being forced to step back and deal with aggressive competition in the low-end given the strength of MediaTek inspired competition, which could continue and be problematic for some time. 2) On converged devices, while volumes were strong at 21.5mn (+3% qoq/+57% yoy), pricing was very aggressive (-17 [quarter-on-quarter/-18% year-over-year) given a worse mix and aggressive pricing in our view. With Symbian^3 delayed and rising competition, we believe this remains an issue for the next few quarters.”

MKM Partners: “Reiterate Sell and $10 price target on poor [second quarter 2010] device margins and product delays – As we noted in our preview note, Nokia is facing a grim spring because of suddenly sharpening high-end product competition and the launch delay of the new generation of Nokia Symbian phones from [the second quarter of 2010 to the third quarter].”

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